Fairness isn’t optional. How to design a tax system that works



File 20190227 150708 1iizk7e.jpg?ixlib=rb 1.1
No-one would ask low earners to pay the same as high earners.
Shutterstock

Fabrizio Carmignani, Griffith University

This is part of a major series called Advancing Australia, in which leading academics examine the key issues facing Australia in the lead-up to the 2019 federal election and beyond. Read the other pieces in the series here.


Any discussion of the tax system requires a common understanding that its purpose goes beyond revenue.

To see this, ask whether we would be willing to raise as much revenue as we do now by simply requiring each resident and business to pay A$16,400 a year, with no further complications.

We could do this. It would generate the A$450 billion the Commonwealth raises now.

And it would be appealing in some ways. It would minimise tax evasion. There would be no exemptions, no tax returns, no loopholes. And payment would be easy to monitor. It would also save the taxpayer the cost of submitting tax returns and the government the cost of checking them.

We all want some fairness

People who earn more than A$76,000 would be delighted, because they would pay less tax than they do now.

Households with people who earn much less would be less happy. Each child, no matter how young, would have to pay A$16,400. A household with two parents (one working) and one child would have to pay twice as much as it does now.

Unemployed Australians would pay the same as mining tycoons. Mum-and-dad businesses would pay the same as large corporations.

But we wouldn’t accept such a system, because it wouldn’t be fair. And that’s not just because fairness is one of our core values.

Inequality has an economic cost. Modelling by staff of the Organisation for Economic Cooperation and Development (OECD) shows that a 1% increase in a nation’s inequality lowers its gross domestic product by between 0.6% and 1.1%.

The researchers find that beyond a certain point growing inequality can undermine the foundations of market economies and lead to inequalities of opportunity. They report:

This smothers social mobility, and weakens incentives to invest in knowledge. The result is a misallocation of skills, and even waste through more unemployment, ultimately undermining efficiency and growth potential.

Progressivity helps

Almost all developed countries use the tax system to fight inequality, by increasing the rate of personal income tax as taxable income grows. In a typical “progressive” personal income tax system the first $5000 earned might be taxed at ten cents in the dollar, while subsequent earnings might be taxed at 20 cents in the dollar. The result is that higher earners pay a greater proportion of their earnings in tax.

Australia has such a system. Our personal income tax system is more progressive than most of the 36 OECD members.

But it has been getting less progressive over time.

A standard measure is the difference in proportion of earnings devoted to tax (the “tax wedge”) for high earners on 167% of a nation’s average income and low earners on 67% of the average. The greater the difference, the more progressive the system.



The graph shows Australia’s system became less progressive throughout the first mining boom in the 2000s. It then became more progressive during the global financial crisis and probably as a result of the government’s response to it. Progressivity has been drifting down since.

Unless we take action to make our personal income tax system more progressive, it is likely to become less progressive still.

Tax cuts legislated in 2018 will accentuate the trend by dramatically flattening Australia’s personal income tax scales by 2024-25, unless reversed as Labor has promised should it win the election.

Our company tax rate is high …

Company taxes are almost always proportional, set at a flat rate. Debate is about how high that rate should be.

Lower rates are said to encourage business investment, stimulating employment, wages and economic growth. But if company taxes are cut, government needs to find more revenue from somewhere else, or wind back spending.




Read more:
New figures put it beyond doubt. When it comes to company tax, we are a high-tax country, in part because it works well for us


Australia’s standard rate is 30%, reduced to 26.5% (and soon enough 25%) for companies with turnovers of less than A$50 million. It is the second-highest rate in the OECD, behind only France. A broader measure of Australia’s “effective” company tax rate, taking into account tax breaks, still shows it is high compared to other countries.

The high rate is little noticed at home. Most Australian shareholders are able to get a tax credit for the company tax paid on the profit that funds their dividend (a practice Labor has promised to wind back). This means the credit can cut the the income tax collected from a dividend recipient to zero, but not below it resulting in a payment from the Tax Office.

… which may not be a problem

There is no clear association between corporate tax cuts and economic growth.

Rough calculations using OECD and International Monetary Fund data suggest that, if anything, higher economic growth is associated with smaller tax cuts.

In part this is because foreign companies consider things other than the tax rate in deciding where to invest. In part it is because the revenue lost from corporate tax cuts has to be made up from somewhere else (most likely from extra income tax as incomes rise and push people into higher tax brackets).

Since 2001, when Australia’s rate of company tax was cut to 30%, Australia’s annual economic growth rate has averaged 2.9%. In the 17 years before then, when the company tax rate averaged about 39%, annual economic growth averaged 3.5%.

None of this implies causality. But it does show that lower company tax rates and better economic performance do not necessarily go together.

International surveys show that Australia, despite its relatively high company tax rate, is regarded as one of the 20 countries in which doing business is easiest. What most works against Australia is the high costs of electricity.

New taxes are waiting in the wings

In summary, there appears to be scope for reducing personal income tax rates at the lower end of income distribution while increasing them at the top end.

Our company tax rates are high, but this need not be a problem.

If company taxes were to be cut, other taxes would have to increase. One option is to increase the goods and services tax. But this is not ideal as the GST is a regressive tax; that is, it tends to make income distribution more unequal.

There are other options.

We could impose an extra, much higher tax rate on very high incomes, as Democratic representative Alexandria Ocasio-Cortez has proposed for the US.

It wouldn’t be a first. Australia’s top marginal rate was 75% in the early 1950s. Or we could reimpose an inheritance tax. A well-designed one would not only fund government spending but also work against intergenerational inequality.




Read more:
The workplace challenge facing Australia (spoiler alert – it’s not technology)


The Conversation


Fabrizio Carmignani, Professor, Griffith Business School, Griffith University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Vital Signs. Do deficits matter any more?


Richard Holden, UNSW

It seems that whoever wins the White House in 2020, the US federal deficit will blow up.

President Donald Trump has already signed into law massive tax cuts that are estimated to expand the deficit by at least US$1.5 trillion over the next decade.

The list of Democrats seeking their party’s presidential nomination has moved into double digits, but there aren’t many fiscal conservatives among them.

Bernie Sanders looks set to try and outdo his own 2016 campaign and its big-spending proposals that include “Medicare for all” and free public tertiary education. Other leading contenders such as senators Elizabeth Warren and Kamala Harris have announced similar plans.

And the rock star du jour of US progressive politics, Alexandria Ocasio-Cortez (or @AOC as the cool kids say), has gone even further with her “Green New Deal” — a grab bag of gigantic spending projects being presented as an environmental policy. They are estimated to cost between US$51 trillion and US$93 trillion over a decade.

The big question amid all this red ink is: does it matter?

Red ink for a return

There have generally been two schools of thought on this. On the conservative side, elected representatives and commentators have emphasised that higher spending eventually results in higher interest rates as borrowers compensate for risk, and higher taxes as a result. In short, there’s no free lunch.

The more liberal position on deficits is that it depends what the government spends the money on. Economic stimulus during a downturn, such as during the Great Recession of 2008, is a good idea provided that it is temporary. And even in ordinary economic times, there may be large investments in physical and social infrastructure that have high returns, far exceeding the government’s cost of borrowing.

If spending on early-childhood education has double-digit rates of return and the government can borrow long-term at 3%, these investments are a no-brainer.

Notice the logic in that argument. The returns need to be carefully assessed and compared to the actual government cost of borrowing.

Not red ink without reason

Various commentators on the political left – explified by Paul Krugman of the New York Times – argue that this logic is licence for serious government spending on infrastructure, but with an eye to the overall size of the spending. As Krugman puts it

Am I saying that Democrats should completely ignore budget deficits? No; if and when they’re ready to move on things like some form of Medicare for All, the sums will be so large that asking how they’ll be paid for will be crucial.

I have said repeatedly in this column and elsewhere that the same is true in Australia. We can borrow cheaply, there are high-return government investments to be made, and we are suffering from “secular stagnation” – a protracted period of lower growth.

But that doesn’t mean that @AOC’s socialist (her own term) wish list can be funded in a consequence-free way just because the US prints its own currency.

Accompanying the @AOC-Sanders-Warren agenda is a cottage industry of “heterodox” economists like Stephanie Kelton who say deficits don’t matter for countries that issue their own currencies. Why? Because they can always print more. They risk hyperinflation if they do enough of it, but heterodox economists argue that’s unlikely.

Except in Weimar Germany. And Zimbabwe. And Venezuela.

The recent tragedy in Venezuela is instructive. When the crude oil price collapsed in 2014 the government was left with a huge deficit, but still needed to pay the salaries of government workers and the military. So it printed money. With more money in the economy, but no increase in the number of things available to buy, the price of goods climbed.

That meant the government had to print still more money for the workers whose incomes bought less, which led to more inflation, more money printing, even higher prices, and pretty quickly hyperinflation of over 1,200,000%.

Just because Australia has avoided hyperinflation…

Economists who promote the idea of large deficits point out that that hasn’t happened in Australia or the United States, but one of the reasons for that is that they have avoided really large deficits.

After the next US election, who knows.

In a timely warning, Federal Reserve Chair Jerome Powell told the US Senate this week: “the idea that deficits don’t matter for countries that can borrow in their own currencies I think is just wrong”.

More importantly, the idea that deficits need not matter is dangerous.

It is a proposition with zero appeal among mainstream economists, but populist politicians are drawn to it and are increasingly keen to sell it to the public.

Let’s be clear. We should invest more in education, health, high-speed rail and child care if the numbers stack up, even if it means increasing deficits. But deficits do matter. We would be unwise to think we could do it without limit.




Read more:
Now is the time to plan how to fight the next recession


The Conversation


Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

ALP urges Fair Work Commission to give “substantial” minimum wage increase


Michelle Grattan, University of Canberra

The Labor opposition has called for a “substantial” increase in the minimum wage, in a submission lodged with the Fair Work Commission’s annual wage review.

But the ALP has not put a figure on the amount it believes would be appropriate.

With Bill Shorten making wages one of the centrepieces of his election pitch, the submission flags that an ALP government would rewrite the guidelines used by the commission in its wage setting.

“The Opposition accepts that the panel is constrained by the current legislative provisions, but no longer has confidence that these provisions have the capacity to deliver the wages growth that the lowest paid workers, and our economy, require,” the submission says.

The national minimum wage at present is $18.93 an hour, which is
$719.20 for a 38-hour working week.

The ACTU wants rises brought in over two years amounting to an
increase of 11.5%, that would take the minimum wage to nearly $42,000 a year.

It proposes a “living wage” of 60% of the median wage.

Under its proposal to the commission the minimum hourly rate would rise this year to $20.07, with the subsequent increase taking it to $21.17.

Labor has not yet released its full wages policy but while Shorten has spoken of a living wage, the opposition is not embracing the ACTU position, preferring to leave the onus on the FWC, under changed guidelines that would see the minimum wage boosted.




Read more:
Explainer: what exactly is a living wage?


In its submission, the opposition says too many people are not getting a fair day’s pay for a fair day’s work. It points to years of wage stagnation, the collapse of bargaining, insecure work and
exploitation, and a minimum wage that traps people in poverty.

“A fair wage system is fundamental to a stronger economy too,” the
submission says. “Because the incomes of working people are what
drives confidence, demand and growth.

“The people most affected by this tribunal’s decision spend every
single dollar they earn. It’s their wages and their purchasing power that helps keep small businesses afloat”.

Labor says the FWC should recognise in its decision a number of
factors, including that “everything is going up except for wages”.

It points out that “since 2013 productivity has grown four times
faster than wages” and “since 2016 company profits have grown five
times faster than wages”.

The opposition argues that experience overseas shows significant
increases in the minimum wage can be made without costing jobs, and says persistent low wages growth is a “threat to consumer demand and the broader economy”.

The submission says that in the last five years the minimum wage
averaged 54.3% of median wages.

Shorten on Thursday said that apart from having a higher minimum wage, other initiative by a Labor government to improve wages would include restoring penalty rates, pressing for pay equity in feminised industries, and protecting labour hire workers and sub-contractors.

Scott Morrison said Shorten was either lying to people in saying he could do something about their wages – because he hadn’t explained how – or “if he’s telling the truth, then he is putting an enormous cost on small and family businesses that will force them to lay off staff. That is not good for the Australian economy.”The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Grattan on Friday: The Coalition is trapped in its coal minefield


Michelle Grattan, University of Canberra

Sydney shock jock Ray Hadley was apoplectic. Home Affairs Minister
Peter Dutton, one of Hadley’s favourites, who has a regular spot on his 2GB program, had just committed blasphemy.

Dutton said he didn’t believe in the government building a new
coal-fired power station. Hadley couldn’t credit what he was hearing. “You’re toeing the [Morrison] company line”, he said accusingly.

It’s another story with Dutton’s cabinet colleague and fellow
Queenslander, Resources Minister Matt Canavan, who is part of the
Queensland Nationals’ push for support for a new power station in that state.

“Studies have come back always saying that a HELE [high-efficiency, low-emissions] or a new coal-fired power station would make a lot of sense in North Queensland,” Canavan said this week.

The two ministers’ divergent views are not surprising on the basis of where they come from. In Brisbane voters tend to share similar opinions on climate change and coal to those in the southern capitals – it’s the regions where support for coal is stronger.

What’s surprising is how the rifts at the government’s highest levels are being exposed. In these desperate days, it is every minister, every government backbencher, and each part, or sub-part, of the Coalition for themselves.

Never mind cabinet solidarity, or Coalition unity.

The most spectacular outbreak came this week from Barnaby Joyce,
declaring himself the “elected deputy prime minister” and pressing the government for a strongly pro-coal stand.

It was a slap at besieged Nationals leader Michael McCormack, after rumourmongering that McCormack might be replaced even before the election. Predictably, the NSW Nationals, fighting a difficult state election, were furious.

The Joyce outbreak was further evidence that the federal Nationals are a mess, over leadership and electorally. They have a party room of 22 – there are fears they could lose up to four House of Representatives seats as well as going down two in the Senate.




Read more:
View from The Hill: Coal turns lumpy for Scott Morrison and the Nationals


(However it’s not all gloom in the Nationals – at the election they will gain three new women, two in the Senate – Susan McDonald from Queensland and Sam McMahon from the Northern Territory – and Anne Webster in the Victorian seat of Mallee. Whatever happens to the party’s numbers overall, the women will go from two to four or five, depending on the fate of Michelle Landry, who holds the marginal seat of Capricornia. The Nationals’ NSW Senate candidate is also a woman but is unlikely to be elected.)

By mid week Joyce was back in his box, stressing that McCormack would take the party to the election. But he was still in the coal advocacy vanguard.

The coal debate and the assertiveness of the Queensland Nationals
smoked out a clutch of Liberal moderates, who question spending
government money on coal projects (although there is some confusion between building power stations and underwriting ventures).




Read more:
Queensland Nationals Barry O’Sullivan challenges Morrison over coal


The government’s policy is for underwriting “firm power” projects, on a technology-neutral basis, if they stack up commercially.

The marauding Nationals were derisive of moderate Liberals trying to protect their seats. “Trendy inner-city Liberals who want to oppose coal and the jobs it creates should consider joining the Greens,” Queensland National George Christensen said tartly on Facebook.

It was a rare appearance by the moderates, who have made a poor
showing over the last few years, True, some were crucial in achieving the same-sex marriage reform. But in general they’ve failed to push back against the right’s tightening ideological grip on the Liberal party, and the government has suffered as a result.

The week highlighted, yet again, that instead of a credible energy
policy, the government has only confusion and black holes.

With his recent announcements, Morrison has been trying to show he’s heard the electorate on climate change. But actually, these were mostly extensions of what had been done or proposed.

The Abbott government’s emissions reduction fund (renamed) is getting an injection, given it would soon be close to exhausted. And the Snowy pumped hydro scheme, announced by Malcolm Turnbull, has received the go-ahead. Didn’t we expect that? There was also modest support for a new inter-connector to transmit Tasmanian hydro power to Victoria.

The government can’t get its “big stick” legislation – aimed at
recalcitrant power companies – through parliament. It will take it to the election. But who knows what its future would be in the unlikely event of a re-elected Coalition government? It would face Senate hurdles and anyway “free market” Liberals don’t like it.

And then we come to the underwriting initiative. The government has 66 submissions seeking support, 10 of which have “identified coal as a source of generation”.

Sources say it is hoped to announce backing for some projects before the election. But this will be fraught, internally and externally, for the government.

One source hinted one project might involve coal. Even if this is
true, it won’t satisfy the Coalition’s coal spruikers, deeply unhappy that Morrison has flagged there won’t be support for a Queensland coal-fired power station. (The Queenslanders liken Morrison’s cooling on coal to Kevin Rudd’s 2010 back off from his emissions trading scheme.)

On the other hand, underwriting of any coal project would alarm
Liberals in the so-called “leafy-suburbs” electorates.

Given the proximity to the election, the government could do little more than give promises to particular projects. There is also the risk of blow back from those whose bids are unsuccessful.

There would be no obligation on a Labor government to honour any
commitments, because formal agreements would not have been finalised.

Meanwhile the government is trying to promote a scare against Labor’s climate policy, still to be fully outlined, which includes reducing emissions by an ambitious 45% by 2030 (compared with the government’s pledge of 26-28%).

But unlike, for example, the scare over the ALP’s franking credits
policy (dubbed by the government a “retirement tax”), this scare is much harder to run, except in specific regional areas.

The zeitgeist is in Labor’s favour on the climate issue, not least
after sweltering summer days and bushfires.

The public have a great deal of faith in renewables – in focus groups people don’t just like them, they romanticise them.

It seems the government can’t take a trick on climate and energy
policy – even the school children are reminding it of that.




Read more:
Students striking for climate action are showing the exact skills employers look for


The Conversation


Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

All Boeing 737 MAX flights grounded – and travellers could feel it in the hip pocket


Chrystal Zhang, Swinburne University of Technology

With investigations under way into two crashes of Boeing’s 737 MAX 8 aircraft, the US manufacturer has caved to pressure and grounded the entire global fleet totalling 371 planes. That includes both model 8 and 9 versions of the aircraft.

The company issued a statement saying this occurred:

… out of an abundance of caution and in order to reassure the flying public of the aircraft’s safety.




Read more:
Flights suspended and vital questions remain after second Boeing 737 MAX 8 crash within five months


But the impact on passengers and air travel could last for months as airlines try to reschedule flights and seek other aircraft to meet demands. While things are still evolving, what should you anticipate as a traveller?

Everybody down

US President Donald Trump’s order on Wednesday prompted the Federal Aviation Authority to ground all 737 MAX aircraft flying in and out of the US.

While it is legitimate for a government to issue regulatory orders to intervene in an airline’s operation due to safety or security concerns, it is unprecedented that such a large number of countries are taking action.

At least 45 International Civil Aviation Organisation member states had already either ordered their airlines to ground 737 MAX aircraft, or suspended entry of such planes into enter their airspaces.

Countries affected include China, Indonesia, Germany, UK, France, the Netherlands, Singapore, Australia, New Zealand, Canada and now the US.

While investigations into the two crashes could last for months or even years before any conclusion is drawn, the length of suspension is also unknown at this stage.

Yet holiday seasons such as Easter and school vacations are approaching, and many of us will no doubt be looking to fly away for a break.

Expect disruption

Airlines face disruption almost every day: airline operation is a complex system. Disruption can be caused by unforeseeable weather conditions, unexpected technical or mechanical issues of an aircraft, or associated safety hazards or security concerns.

Airlines therefore have strategies in place to manage or at least mitigate the effect of the disruption and reduce any potential delays. This could include but is not limited to:

  • changing or swapping an aircraft type

  • combining two or three flights into one operation

  • arranging alternative flights for travellers

  • moving travellers to other airlines if their tickets have been issued.

With only 371 Boeing 737 MAX family jets in operation, this is a small percentage of the total of more than 6,000 of the previous model and gives airlines the ability to use other jets in their fleet as a replacement.

A snapshot of Boeing 737 models in flight at 7:52am UTC Thursday (6:52pm AEDT) shows 1,500 aircraft. Not a 737 MAX in sight.
Courtesy of Flightradar24.com

But the current suspension will present significant challenges for some airlines.

Subject to their fleet size, the scope of their network, and other resources and capacity available, big airlines with multiple types of aircraft in their fleet are more capable of managing such disruption.

For example, Air China, China Eastern, China Southern, American Airlines and Southwest will have more resources to arrange for travellers to fly to their destinations.

In contrast, low-cost or regional carriers will be limited in their capacity to manage the disruption.

For instance, SilkAir and Fiji Airways have six and two Boeing 737 MAX aircraft in their respective fleets. Grounding the model means that both carriers will lose 16% of their total capacity.

Fares could go up

While airlines are making every effort to minimise the disruption, all these arrangements come at a cost.

Airlines might have difficulties in sourcing capacity to replace the aircraft, resulting in inevitable delays or cancellations. And delays and cancellations also result in additional cost to airlines operation.

Travellers could soon see an increase in airfares. The rising fuel cost and shortage of pilots have already put global airlines under pressure to manage operational costs.

Impact on Boeing

Boeing and Airbus are a duopoly, said to dominate 99% of the global large aircraft orders, which make up more than 90% of the total aircraft market.

Over the past few decades, Boeing has weathered problems before and maintained an exceptional reputation for its reliable and efficient aircraft design, manufacturing and service.

In 2018 , Boeing received US$60 billion for 806 aircraft deliveries, comparing to Airbus’s US$54 billion for 800 aircraft deliveries.

Of all the aircraft sales, the Boeing 737 MAX series – designed to replace the current 737 family – was becoming one of the most popular airliners, despite being only introduced to the market in May 2017.

But the two recent crashes have raised concerns about reliability of the 737 MAX 8 autopilot system, the Manoeuvring Characteristics Augmentation System.

Some pilots have complained about a lack of training for the MAX 8. Others have complained of problems.

The aircraft represents a significant change from its predecessor models, including new engines, new avionics and different aerodynamic characteristics.

Potential risks

The risk for Boeing now is the potential consequences flowing from any investigation into the aircraft crashes. These could include:

  • complete or partial cancellation of orders placed by global airlines yet to be delivered

  • litigation by the affected airlines and the victims of the ill-fated aircraft, seeking damages caused by any product defect (if proof of any defect could be established)

  • new opportunities for its rivals to promote their aircraft; this could allow, for example, China’s state-owned aircraft manufacturer, COMAC, to make new waves in the industry.

Regardless, Boeing could face enormous financial losses and devastating economic consequences.

Boeing’s shares dropped after the Ethiopian Airlines crash on Sunday, but have started to recover.

While Boeing surely carries enough insurance coverage for losses, it is inevitable the damage to its brand is more far-reaching in the medium to long term. This will affect the confidence of aircraft operators and the general public.

Even if any technical defects discovered are quick to fix, a damaged brand tends to require more time and much more significant efforts to recover.

Is it safe?

Of course there is a question everyone wants answered: is it safe to fly?

The answer is definitely. Statistically speaking, flying on a commercial passenger airliner is the safest mode of transportation.

A recent study of US census data puts the odds of dying as a plane passenger at 1 in 188,364. That compares with odds of 1 in 4,047 for a cyclist, 1 in 1,117 for drowning and 1 in 103 for a car crash.

Globally, 2017 was the safest year in aviation history with no passenger jet crashes recorded.

The most advanced technology used in aircraft design and manufacturing, and in air traffic control management, and the comprehensive, efficient pilot training and management are aimed at a safe flight.

So the decision of Boeing to suspend flights of its 737 MAX aircraft is welcomed, for now. But, pending the findings of the investigations, the questions as to how long the suspension will be in effect and how Boeing will address the issue remain unanswered.The Conversation

Chrystal Zhang, Senior Lecturer in Aviation, Swinburne University of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Poll wrap: Labor gains in Newspoll after weak economic report; Labor barely ahead in NSW



File 20190312 86717 nfzbgs.jpg?ixlib=rb 1.1
The Coalition government has had another rocky fortnight, and the polls show it is behind on a two-party preferred basis.
AAP/Dean Lewins

Adrian Beaumont, University of Melbourne

About two months from the expected May election date, this week’s Newspoll, conducted March 7-10 from a sample of 1,610, gave Labor a 54-46 lead, a one-point gain for Labor since last fortnight. Primary votes were 39% Labor (steady), 36% Coalition (down one), 9% Greens (steady) and 7% One Nation (up two).

This Newspoll is the Coalition’s 50th successive Newspoll loss. The closest they have come to breaking that losing streak was a run of four consecutive 51-49 results from July to early August 2018 before Malcolm Turnbull was dumped. This Newspoll reverses the gains the Coalition had made to close the gap to 53-47 from 55-45 in November and December.

Despite the Coalition’s woes on voting intentions, Scott Morrison remains relatively popular. 43% were satisfied with his performance (up one), and 45% were dissatisfied (down three), for a net approval of -2. Bill Shorten’s net approval was up three points to -15. Morrison led Shorten as better PM by 43-36 (44-35 last fortnight).

I believe Morrison’s relative popularity is because he has not yet proposed something that would make him unpopular, in the way Tony Abbott did with the May 2014 budget, and his January 2015 knighting of Prince Philip. Turnbull was very unpopular with the hard right, and their hatred of him damaged his overall ratings.

During the election campaign, Labor will attempt to tie Morrison to unpopular Coalition policies, and this could impact his ratings.

The last fortnight has not been good for the Coalition with the retirements of Christopher Pyne and Steve Ciobo, infighting within the Nationals, and Turnbull and Julie Bishop saying they could have beaten Shorten if they were the leader.

While these events may have had an impact, I believe the Coalition’s biggest problem is weak economic data. On March 6, the ABS reported that Australia’s GDP grew 0.2% in the December quarter after the September quarter GDP was up 0.3%. In per capita terms, GDP growth was negative in both the September and December quarters, meaning Australia has had its first per capita GDP recession since 2006.

In the December quarter, wages grew by 0.5%, matching the rate of inflation in that quarter. The Coalition already has a problem with well-educated voters owing to their perceived lack of climate change policies and the removal of Turnbull – see my personal website for where I thought Morrison could have problems. With good wages growth and a strong economy, the Coalition may have been able to compensate with less educated voters.




Read more:
Poll wrap: Newspoll steady at 53-47 despite boats, and Abbott and Dutton trailing in their seats


With neither a strong economy nor good wages growth, I believe the Coalition’s only realistic chance of re-election is a massive scare campaign against Labor’s economic policies, such as the proposal to abolish franking credit cash refunds.

Essential: 53-47 to Labor

This week’s Essential poll, conducted March 6-11 from a sample of 1,080, gave Labor a 53-47 lead, a one-point gain for Labor that validates Newspoll’s movement. Primary votes were 38% Labor (up one), 37% Coalition (down one), 8% Greens (down one) and 7% One Nation (up one). According to The Poll Bludger, this is the worst result for the Greens from any pollster since September 2016.

Morrison’s net approval was +2, down two points since January. Shorten’s net approval was -6, up six points. Morrison led Shorten by 44-31 as better PM (42-30 in January).

62% thought climate change is happening and is caused by human activity (down one since October). 51% thought Australia is not doing enough to address climate change (down two since December). By 52-48, voters thought the reopening of Christmas Island reflected genuine concern about boats arriving, rather than a political ploy; there was no undecided option in this question.

On issue questions, the Liberals led Labor by 19 points on border protection, 16 points on national security and 15 points on economic management. Labor was 18 points ahead on the important issue of safeguarding fair wages and conditions, and had 7-9 point leads on climate change, the environment, health, education and housing affordability.

NSW Newspoll: 50-50 tie, ReachTEL: 51-49 to Labor, plus seat polls

The New South Wales election will be held on March 23. A Newspoll, conducted March 8-11 from a sample of 1,003, had a 50-50 tie, unchanged since late January. A uComms/ReachTEL poll for The Sun-Herald, conducted March 7 from a sample of 1,019, gave Labor a 51-49 lead, unchanged since the last NSW ReachTEL poll in late November.

Primary votes in ReachTEL were 28.7% Liberals (down 3.4%), 7.0% Nationals (up 2.6%), 34.1% Labor (steady), 9.6% Greens (steady), 5.6% One Nation (down 1.9%), 4.6% Shooters, Fishers and Farmers (up 1.3%), 5.8% for all Others (steady) and 4.7% undecided (up 1.6%). After excluding undecided, The Poll Bludger has primary votes of 37.5% Coalition, 35.8% Labor, 10.1% Greens, 5.9% One Nation and 4.8% Shooters.

The drop for the Liberals but gain for the Nationals suggests that the Coalition could perform relatively badly in Sydney, but better in the country. According to the ABC’s Antony Green, the Shooters will be contesting 25 of the 93 lower house seats, and One Nation just 12, so both parties’ support will be overstated in this statewide poll.

In Newspoll, primary votes were 40% Coalition (up one), 36% Labor (steady) and 10% Greens (steady). In the January NSW Newspoll, One Nation had 6%, but they have been excluded from the current poll as they are not contesting many seats. The exclusion of One Nation probably assisted the Coalition.




Read more:
Poll wrap: Coalition gains in first Newspoll of 2019, but big swings to Labor in Victorian seats; NSW is tied


44% were satisfied with Premier Gladys Berejiklian’s performance in Newspoll (up three), and 38% were dissatisfied (down five), for a net approval of +6. Opposition Leader Michael Daley’s net approval improved seven points to -1. Berejiklian led Daley by 41-34 as better Premier (44-31 in January).

Daley led Berejiklian as better Premier in ReachTEL by 53.3-46.7 (54.2-45.8 in November). ReachTEL’s forced choice better PM/Premier questions are usually better for opposition leaders than other polls. Voters opposed the government’s plans for Sydney sports stadiums by 52-37. By 48-43, voters thought that Labor was not ready to govern.

There were two YouGov Galaxy seat polls for The Daily Telegraph conducted February 28. East Hills was tied at 50-50 (50.4-49.6 to Liberal in 2015). Ryde had a 53-47 Liberal lead (61.5-38.5 to Liberal in 2015). Last week, there was also a national Greenpeace ReachTEL poll that gave Labor a 53-47 lead by respondent preferences. You can read more about these polls on my personal website.

The Daily Telegraph has seat polls of Lismore and Barwon conducted last week from samples of 500-600 by YouGov Galaxy. In Barwon, the Nationals lead the Shooters by just 51-49; the Nationals won 62.9% vs Labor in 2015.

In Lismore, Labor leads the Nationals by 51-49 (50.2-49.8 to Nationals in 2015). Primary votes were 35% Nationals (42.5% in 2015), 28% Greens (26.4%) and 27% Labor (25.6%). Even though NSW uses optional preferential voting, primary votes changes suggest an easier win for one of the left parties than 51-49. Seat polls have been very unreliable at past elections.

Key Brexit Commons votes this week

From March 12-14, the UK House of Commons will vote on PM Theresa May’s Brexit deal, whether the UK should leave without a deal, on delaying Brexit beyond the scheduled March 29 exit date, and on an amendment that would lead to a second referednum. Votes will occur in the early morning March 13-15 Melbourne time.

You can read my preview of these votes on The Poll Bludger. On February 28, I had a more general article about Brexit published by The Poll Bludger, which explained Labour’s recent slump in the UK polls.The Conversation

Adrian Beaumont, Honorary Associate, School of Mathematics and Statistics, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Grattan on Friday: Josh Frydenberg has a great job at the worst time


Michelle Grattan, University of Canberra

Josh Frydenberg is highly ambitious – in the fashionable jargon, you’d call him a “forward-leaning” politician. But even he must be
surprised, reviewing the past 12 months, at where he is, given where he was.

Mid last year he was working up the National Energy Guarantee for the Turnbull government. By August that had imploded, decapitating the then prime minister but catapulting Frydenberg into the treasurership.

Great job. Just an unfortunate time to have it. Rather a parallel with the situation of Chris Bowen, appointed treasurer in the ill-fated second Rudd government, and now Frydenberg’s opposite number.

As Scott Morrison is trying to persuade people that voting Labor will land them in a recession (he is careful with the wording but that’s his thrust) Frydenberg this week had to counter the economic
pointy-heads seizing on the latest national accounts as showing a “per capita recession”.

To put this notion in simple terms, the low December quarter growth
rate (0.2%) when looked at against population, meant that on a per
person basis growth has now gone backwards for two quarters.

The technical definition of “recession” is two quarters of negative growth.

It should be stressed that Australia is NOT in a recession. But you
see the political risk for the government of these musings. No wonder Morrison dismissed the “per capita recession” term as a “made up” statistic.




Read more:
Vital Signs: Australia’s sudden ultra-low economic growth ought not to have come as surprise


Leaving the “per capita” debate aside, with the government campaigning on its economic management, it is not good for it to have the latest numbers showing growth slowing to an annual rate of 2.3%, though Morrison tries to feed the economic challenges into his don’t-trust-Labor narrative.

The national accounts are the last big set of economic numbers before the April 2 budget. The Treasury boffins, under secretary Phil Gaetjens, are now putting them into the figuring as Morrison, Frydenberg and other members of cabinet’s expenditure review committee work on the policy measures in a budget that will be driven almost totally by the needs of the election to be held within weeks of its delivery.

Gaetjens and Frydenberg might reflect, incidentally, that this, the first budget for each of them as secretary and treasurer, is likely to be their last in these roles – if the opinion polls are right.

Labor has indicated it would probably sack Gaetjens (who was chief of staff to Morrison when he was treasurer). And a treasurer ousted in an election wouldn’t normally expect to get another bite at that job, though Bowen looks like he will be the exception.

The stakes could hardly be higher for Frydenberg’s maiden budget. It will needs a certain “wow” factor to appeal to as many voters as it can reach. It has to avoid landmines (sometimes even small things can blow up) and dubious numbers; either could give the opposition grist for the scrutiny that will follow.

The political climate in the run up to the budget will be influenced by another election – on March 23 in NSW.

With the two sides in that state close in the opinion polling,
doubt about what’s going on in the regions and an optional
preferential voting system, there is a lot of uncertainty about the result.

In a legislative assembly of 93, 47 is the number for a majority. If the Coalition loses six seats it will be forced into minority government. At present the Berejiklian government has 52 seats, Labor 34, Greens 3, the Shooters, Fishers and Farmers 1, and there are 3 Independents.

If there is a big swing in NSW, it will further rattle the federal
Coalition before the budget. The only upside would be the Morrison
government might hope NSW voters had got rid of some of their general angst in the first of the two visits they are making to the polls this year.

On the other hand, if the Berejiklian government did better than
anticipated, that would give a morale boost to the Feds (whether
justified or not).




Read more:
Politics with Michelle Grattan: Ian McAllister on voters and issues in the coming election


Once budget week (which will include Bill Shorten’s reply on the
Thursday night) is finished, the question will be whether Morrison
announces the election immediately for May 11, or opts for a May 18 poll.

(There has been speculation he could go even later, to the extreme inconvenience of the Australian Electoral Commission, but that would seem pointless.)

As things stand, it is hard to see what the government would gain by delaying until May 18. With campaigning already in full swing, voters will be totally sick of it by budget time and surely will want the election over as soon as possible after that.

If the government did not call the election immediately budget week was finished, this would allow more Senate estimates hearings. That week contains two days of hearings; without a poll announcement, they would continue another week.

These interrogations of ministers and officials work to the advantage of an opposition. Remember how in 2016, Labor extracted the decade-long cost of the proposed company tax cuts (nearly $50 billion) which it used to effect in its campaign?

Whether the election is May 11 or 18, the campaign will be much about the budget, putting huge pressure on Frydenberg, only months into the treasury job. Not least, colleagues will be able to look at his performance through the lens of his potential suitability for another job – opposition leader.




Read more:
Event: your Q&A with Michelle Grattan in Melbourne


The week brought some added pressure on the Treasurer, this time on
the home front, with high-profile barrister and refugee advocate Julian Burnside declaring he will run for the Greens in Frydenberg’s seat of Kooyong. Burnside will be campaigning hard on
climate change. A former member of the Liberal party, Oliver Yates,
was already in the Kooyong field, with messages on climate and Liberal divisions.

In 2016, Frydenberg had about 58% of the primary vote with Labor and the Greens nearly equal (almost 20% and nearly 19% respectively).

Frydenberg’s primary vote would have to take a huge hit for him to be at any risk (and his record on the NEG has him on the right side of the climate debate). But the presence of Burnside will mean the
Treasurer will have to put extra effort into his electorate just when he’ll be stretched to the maximum in the national campaign.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Future budgets are going to have to spend more on welfare, which is fine. It’s spending on us



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Lifters versus leaners is the language of the past. We are likely to see it less.
Shutterstock

Peter Whiteford, Crawford School of Public Policy, Australian National University

This is part of a major series called Advancing Australia, in which leading academics examine the key issues facing Australia in the lead-up to the 2019 federal election and beyond. Read the other pieces in the series here.


Spending on social security and welfare accounts for more than a third of the Commonwealth budget.

Because of its size, it has been one of the main targets of proposed cuts in every Coalition government budget since 2014.

Despite this, social security and welfare spending has continued to grow. In fact the best way to describe the approach of the Coalition’s past five budgets is attempted rather than actual austerity, with the Senate rejecting or never considering repeated cuts. More than A$10 billion of these were served up again and again in budgets as so-called “zombie measures”.

Whoever wins government will continue to face pressure to further increase welfare and social security spending as the National Disability Insurance Scheme ramps up and a royal commission and demographic shifts build the case for more spending on aged care.

It is also widely recognised that Newstart, the main payment for unemployed Australians, is increasingly inadequate. It has slipped relative to pensions and wages each year because it is indexed to the slower-growing consumer price index. Payments for single parents are also inadequate, having been cut as a result of specific government decisions.

They say it’s us versus them…

The Coalition has responded with policy proposals that stigmatise recipients, such as drug-testing. It has introduced programs such as Online Compliance Intervention (“robodebt”) and ParentsNext that have arguably overreached in clawing back payments and imposing sanctions.

In 2014, the new Coalition government’s first budget speech classified people whose main source of income was support payments as “leaners not lifters”. In 2017, the human services minister described welfare dependency as the most pressing problem facing Australia’s social security system, likening it to “poison” for the unemployed.

And yet most of us are recipients at one time or another or have family members or friends who become recipients because of unemployment, ill health or family breakup.

… but we are them

During any fortnight, more than 5 million Australians, or roughly a quarter of the adult population, receive an income-tested social security payment. This includes an age pension, a disability support pension, Newstart, a carer’s payment, a parenting payment or one of seven other categories of income support.

Family tax benefits supplement the incomes of around another 855,000 families. And 900,000 or so families, many of them not receiving social security benefits or other family payments, are assisted with childcare costs.

As we look over longer periods, receipt of social security payments becomes ever more common.

The social services minister has used point-in-time administrative data to show that in 2018 the share of working-age Australians on welfare fell to 15.1%, “the lowest rate of welfare dependency in over 25 years”.

But the longitudinal Household, Income and Labour Dynamics in Australia (HILDA) Survey finds that over the course of an entire year (2016) about one-third of working-age households contained someone who received an income support payment for some of it.

The longer the time period, the more common becomes the receipt of payments.

Between 2001 and 2015 around 70% of working-age households included someone who received an income support payment at some point (not including the age pension or family payments).

It is one of the most important lessons of longitudinal surveys like HILDA – we, our family or friends are in this together.

While the likelihood of receiving support is greater than acknowledged, that support is less intense than is commonly believed. HILDA shows that 70% of working-age households received some social security benefits over a 15-year period. However, only around 1% of working-age households receive the bulk of their income (90%) from benefits for 10 years or more.

These were people with deep and persistent disadvantage. They were highly likely to be Indigenous Australians or people living in areas with limited job opportunities or people with long-standing disabilities or educational disadvantages.

As the 2016 HILDA report notes:

The welfare system does indeed provide temporary rather than long-term support for most recipients, and is potentially playing a very important safety net role.

The social security system is among the core institutions of contemporary Australian society. And it can be regarded as one of the main levers of not just social policy but economic policy. Australian governments have used the social security system to stimulate household spending during recessions or to avoid recessions — as happened during the global financial crisis.

An effective social security and welfare system is an essential underpinning of a modern economy, not least because security when people are in work requires security during periods when people are looking for work or outside the labour market.

Immediate priorities…

The first welfare priority for a new government has to be to increase the Newstart unemployment benefit. Opposition Leader Bill Shorten has promised that, if elected, Labor will do this via a “root-and-branch review”.

Crossbenchers Rebekha Sharkie and the departing Cathy McGowan want to go further. They have introduced a private member’s bill that would create an independent commission to examine the adequacy of all social security payments other than family payments and payments to veterans. The commission would make recommendations rather than set rates.

The review promised by Shorten and the ongoing commission proposed by crossbenchers need not be mutually exclusive. An immediate review could be used to increase payments in the short term, while an ongoing commission could examine longer-term priorities.

Another urgent priority should be to reform the employment services network. It operates more like a system of penalties than an employment service, requiring participants to apply for 20 jobs a month or go on Work for the Dole programs rather preparing them for work.

… and beyond

There is a case for going further. We are overdue for a comprehensive review of Australia’s social security system. This should be undertaken in an integrated fashion and include tax, family payments and payments for childcare and to support people who study and work.

Looking further ahead, the ageing of Australia’s population is going to force us to spend more on health and aged care.

Population ageing and increased life expectancy represent a fundamental challenge that will inevitably be met by collecting and distributing more of our economy in tax and benefits than at present.The Conversation

Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

It’s more than a free trade agreement. But what exactly have Australia and Indonesia signed?



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Simon Birmingham and Enggartiasto Lukita have signed an agreement that might never be ratified in that form.
DFAT

Pat Ranald, University of Sydney

Australia’s trade minister Simon Birmingham and his Indonesian counterpart Enggartiasto Lukita signed the Indonesia-Australia Comprehensive Economic Partnership Agreement on Monday. Only afterwards (as is often the case) did we get to see what was in it.

We might never see an independent assessment of its costs and benefits.

Beforehand the Department of Foreign Affairs and Trade released a summary of the good news about increased Australian agricultural and education exports, together with statements of support from export industry representatives.

It said more than 99% of Australian goods exports by value would enter Indonesia duty free or under significantly improved preferential arrangements by 2020. Indonesia will guarantee automatic issue of import permits for key products including live cattle, frozen beef, sheep meat, feed grains, rolled steel coil, citrus products, carrots and potatoes. Australia will immediately eliminate remaining tariffs on Indonesian imports into Australia.

But most deals have winners and losers. The devil is in the detailed text, released only after the ceremony.

Employment rights? The environment?

First, what’s missing. There are no chapters committing both governments to implement basic labour rights and environmental standards as defined in the United Nations agreements, and to prevent them from seeking trade advantages by reducing these rights and standards.

Such chapters are increasingly included in trade deals like the Comprehensive Progressive Trans-Pacific Partnership (TPP-11) encompassing nations including Brunei, Malaysia, Mexico, Peru and Vietnam, and the Australia-EU Free Trade Agreement at present under negotiation.

They acknowledge that trade agreements increase competitive pressures, and are intended to prevent a race to the bottom on labour rights and environmental standards.

The fact they are missing from the Indonesia-Australia agreement shows neither government sees them as a priority.

Extra-national tribunals

The deal does include something else contentious that was included in the Trans-Trans-Pacific Partnership; so-called investor-state dispute settlement clauses, in Chapter 14, Section B.

They give special rights to foreign corporations to bypass local courts and sue governments for millions of dollars in extra-national tribunals if they believe a change in law or policy will harm their investment.

The tobacco giant Philip Morris tried it in 2011 using investor-state dispute settlement provisions in an obscure Australia Hong Kong agreement after it lost a fight against Australia’s plain packaging laws in the High Court. It eventually lost in the international tribunal, although after four years and at the cost to Australia of nearly 40 million dollars.

Temporary migrant workers

Article 12.9 of the Indonesia-Australia agreement will give Indonesia an additional 4,000 temporary working holiday visas, and a commitment over the next three years to negotiate arrangements for more “contractual service providers”.

Unlike permanent migrants, who have the same rights as other workers, temporary workers and contractual service providers are tied to one employer and can be deported if they lose their jobs, and so are vulnerable to exploitation, as shown by recent research.

After signing, the implementing legislation has to be passed by both the Australian and Indonesian parliaments before it can come into force.

And not for some time

In Australia, the next steps are for the treaty to be reviewed by the Joint Standing Committee on Treaties. But the likely calling of the federal election in April will dissolve this committee. The committee will be reconstituted after the election with the winning party having a majority.

Last year Labor faced a strong backlash from its membership and unions when it supported the implementing legislation for the TPP-11 despite the fact that it was contrary to the then Labor policy.

This led to the adoption of an even stronger policy at its national conference and a draft bill that would apply to both future and existing trade agreements.

It requires independent assessments of the economic, social and environmental impacts of future trade agreements before they are ratified, outlaws investor-state dispute settlement clauses and the removal of labour market testing for temporary workers, mandates labour rights and environmental clauses and requires the renegotiation of non-compliant agreements should Labor win office.




Read more:
The Senate is set to approve it, but what exactly is the Trans Pacific Partnership?


If the Coalition wins office but not a Senate majority, and Labor implements its policy, a Coalition government could face opposition to ratification of the Indonesia-Australia agreement in the Senate.

If Labor wins government, it will face pressure from its base to implement its policy to conduct an independent assessment and renegotiate the provisions before ratification.

In Indonesia, which has elections in April, the deal could also face a rocky road.

Criticisms of the process led civil society groups to lodge a case which resulted in a ruling by the Indonesian Constitutional Court in November that the Indonesian President cannot approve trade agreements without parliamentary approval.

The opposition parties have been sceptical about the deal. Azam Azman Natawijana, deputy chairman of the parliamentary committee overseeing trade, was quoted in The Australian saying he expected the ratification process to be protracted.




Read more:
Investor rights to sue governments pose real dangers


The Conversation


Pat Ranald, Research fellow, University of Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Vital Signs: Australia’s sudden ultra-low economic growth ought not to have come as surprise



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Both Australia’s trend and seasonally adjusted GDP per capita growth rates have dipped below zero.
Shutterstock

Richard Holden, UNSW

Australia’s big little economic lie was laid bare on Wednesday.

National accounts figures show that the Australian economy grew by just 0.2% in the last quarter of 2018. This disappointing result was below market expectations and official forecasts of 0.6%. It put annual growth for the year at just 2.3%.

But the shocking revelation was that Gross Domestic Product per person (a more relevant measure of living standards) actually slipped in the December quarter by 0.2%, on the back of a fall of 0.1% in the September quarter.

These are the first back-to-back quarters of negative GDP per capita growth in 13 years – since 2006.

We’re going backwards, for the first time in 13 years

The reason this is significant is that the Australian convention around what constitutes a recession is two back-to-back quarters of negative GDP growth.

Since more people in the economy mechanically increases overall GDP, you might think that measuring things on a per-person basis gives a better sense of whether we are better off or worse off.

And you would be right. Why then, do we talk so much about overall GDP?

One answer is that in a lot of advanced economies there isn’t very much population growth, so overall GDP is a good enough measure.

Population growth hides it

The more insidious answer in Australia is that, for a long time, our high population growth, fed by a high immigration rate, has masked a much less rosy picture of how we are doing. And neither side of politics has wanted to admit it.

At 1.6% a year, Australia’s population growth is roughly double the OECD average, which is perhaps why we hear politicians say things like “Australia continues to grow faster than all of the G7 nations except the United States,” as Treasurer Josh Frydenberg did this week.

The good news is that standard economic theory tells us that in the long run, immigration has very little impact on GDP per capita in either direction, unless it drives a shift in the population’s mix of skills.

But in the short term, it depresses GDP per capita because fixed capital such as buildings and machines has to be shared between more workers.




Read more:
Solving the ‘population problem’ through policy


The business lobby doesn’t want us to focus on that because population provides more customers as well as more workers, allowing them to grow without growing domestic market share or exports.

Governments don’t want us to focus on it because adjusting for population growth makes GDP growth look small or, as at present, negative. Also, the tax revenue from the population growth is factored into the official budget forecasts – but the extra social spending needed isn’t always factored in.

Pro tip: watch for population growth as a fudge factor generating a return to surplus in next month’s budget.

There’s a better way of getting at the truth

That said, GDP itself – per capita or not – is not a great measure of the standard of living. That’s why in 2001, the Bureau of Statistics began also reporting real net national disposable income.

It is a measure with advantages over GDP. As the bureau points out, it takes account of changes in the prices of our exports relative to the prices of our imports – our terms of trade. If the prices of our exports were increasing much faster than the prices of our imports (as happened during the mining booms), our standard of living would climb and real net national disposable income would reflect it, where as gross domestic product would not, although it would reflect increased income from increased export volumes.

To get at living standards per person, which is what we are really interested in, the bureau also publishes real net national disposable income per capita.



The graph shows that so far the growth rate of real net national disposable income per capita hasn’t changed much, and that it has been negative for far fewer quarters than in the Coalition’s first term in office.

It bounces around with changes in the prices of imports and exports, and is generally climbing less than when export prices were really high.

A year of two halves?

The treasurer painted 2018 as a “year of two halves”.

The first half was great – the annualised GDP growth rate (what it would have been had it continued all year) was a very impressive 3.8%.

The second half was just 1%.

I’m not sure the change was that clear cut. As I wrote last September, there have been troubling signs for some time, despite the solid headline growth.

Household savings have been plummeting, real wage growth has been stagnant, housing prices have been falling in Sydney and Melbourne. Together they put significant pressure on household spending, which accounts for about 60% of GDP.

Those concerns are now mainstream. Good news on export prices has rescued tax receipts for the time being, and will probably also rescue real net national disposable income per capita.




Read more:
Vital Signs: National accounts show past performance no guarantee of future results


But the fundamentals of the Australian economy are looking somewhat weak. Like the US and other advanced economies, we are living in an era of secular stagnation – a protracted period of much lower growth than we had come to expect.

And until we do something to tackle it, such as a major government investment in physical and social infrastructure, we will continue to face anaemic wage growth, shaky consumer confidence, and mediocre economic growth per person.The Conversation

Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.